Tractor industry faces deep crisis

Experts lament removal of subsidies, warn of industry collapse

LAHORE:

The tractor industry of Pakistan is in crisis, and this crisis, according to industry experts, is deepening with each passing day, leading to a significant slowdown in tractor sales over the years and the closure of manufacturing units. This situation is not only threatening the livelihood of thousands employed within this industry, which has so far reached a 95% localisation level, but also poses a severe risk to Pakistan’s agriculture sector.

“The ongoing dilemma of the tractor industry can be traced back to the economic instability that has plagued Pakistan for more than half a decade,” said an executive of a tractor manufacturer. High inflation rates, fluctuating exchange rates, and the imposition of additional taxes have led to increased production costs, making tractors unaffordable for many farmers. “Additionally, the government’s removal of subsidies that previously made tractors more accessible has further exacerbated the situation,” he added.

In the last few years, tractor sales have plummeted. Although in the previous fiscal year, tractor sales saw a 47% increase, experts remain sceptical about this growth. According to the Pakistan Automotive Manufacturers Association (PAMA), tractor sales stood at 45,494 units in FY24. However, experts do not consider this a strong recovery, as sales were severely hit in previous years due to an almost default-like situation.

The slowdown in the tractor industry has dire implications for Pakistan’s agricultural sector. Tractors are essential for efficient land preparation, sowing, and harvesting, especially in a country where the majority of farmers still rely on traditional farming methods. A reduction in tractor availability means that many farmers will be unable to cultivate their land on time or to the extent needed, leading to lower crop yields and, consequently, higher food prices.

“Agriculture is the backbone of Pakistan’s economy, and without adequate mechanisation, we are at risk of a food security crisis,” said Dr Tariq Sikander, an agricultural economist. “The decline in tractor sales over the years is a clear indicator that our farmers are struggling to keep up with the costs of modern farming. This year, the imposition of a 10% sales tax on tractors will further dent the sales volume,” he added.

Stakeholders are also raising alarms about the future of the tractor industry and its impact on agriculture. Many are calling for urgent government intervention to revive the sector. “The government needs to reinstate subsidies and provide low-interest loans to farmers for purchasing tractors,” said Ali Aziz, a tractor dealer in Lahore. “Without such measures, we could see a complete collapse of the industry.”

Farmers, on the other hand, are feeling the heat more intensely. “We are already dealing with high input costs, and now we cannot even afford the machinery needed to work our lands,” said Hanan Arshad, a farmer from Punjab. “If things continue this way, many of us will be forced to abandon farming altogether,” he added.

The stakeholders added that the future of the tractor industry in Pakistan depends on a combination of government support and economic stabilisation. This ongoing crisis in Pakistan’s tractor industry is a significant concern for the nation’s agricultural sector, as now the country’s biggest tractor manufacturer has stopped production due to various issues. Without immediate and effective interventions, the decline in tractor sales and the closure of manufacturing units could lead to a ripple effect, threatening food security and the overall economy of the country, they added.